Financial Times

Vodafone eyes network for 380m users in India with Idea Cellular merger plan

by Simon Mundy, Nic Fildes and Katie Martin, Financial Times

January 31, 2017 | 7:18 pm
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Vodafone is in talks about a merger of its Indian operations with Idea Cellular, a deal that would create a mobile network with about 380m users and form one of the largest telecoms companies in the world.

The UK mobile operator said yesterday it was “in discussions” with Aditya Birla Group about an all-share deal.

Vodafone shares rose 1.3 per cent to 195.95p on hopes that a deal would help counter competition from aggressive new market entrants. Shares in Idea Cellular jumped 25 per cent, valuing the company at Rs354.3bn ($5.2bn).

“Any merger would be effected through the issue of new shares in Idea to Vodafone and would result in Vodafone deconsolidating Vodafone India,” the company said. “There is no certainty that any transaction will be agreed, nor as to the terms or timing of any transaction.”

The Indian telecoms market has long been tipped for consolidation, with Vodafone seen as a likely buyer of assets. It had planned to float its Indian operation, which would have given it capital to make acquisitions as well as putting a value on its own local operation.

The talks with Idea come after the explosive entry to India’s telecoms by oil products group Reliance Industries, India’s second-largest listed company. Its Jio subsidiary has disrupted the industry by offering its mobile services for free since its launch in September, building a base of 70m customers.

Mukesh Ambani, Reliance’s chairman, has overseen investment of more than $25bn in Jio, in a move that prompted rivals to slash tariffs. Analysts have predicted that Jio’s arrival will trigger a wave of consolidation. ­Aircel and Reliance Communications, controlled by Mr Ambani’s younger brother Anil, announced merger plans in September.

The proposed Vodafone-Idea deal would be the sector’s biggest to date, creating a company whose user base would eclipse that of current market leader Bharti Airtel, which had 266m customers at the end of December.

Investors have long questioned whether Vodafone should cut its losses in India. Despite expanding its customer base since it entered India in 2007, it has struggled to turn a net profit and has taken a number of hefty writedowns on the business.


by Simon Mundy, Nic Fildes and Katie Martin, Financial Times

January 31, 2017 | 7:18 pm
12893  |   93   |   0  |   Start Conversation

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